Dynex Capital, Inc. (NYSE:DX)

The Company with its subsidiaries is a specialty finance company organized as a mortgage real estate investment trust that invests in loans and fixed income securities consisting of single-family residential and commercial mortgage loans.

Update: I reentered this also at 8.90 and it dropped another $0.40. I used some of Anchak's notes for DD (referenced below), but he cautioned last week that even at $8.40 he's backing off due to unknowns from a Fed Operation Twist that could pull down interest rates on the high end of the curve, affect mREIT's. Anchak preferred "TWO" and "MFA". I'm also a fan of TWO.

Updated "Old" PITCH:

Dynex Capital, Inc and the rest of it's Mortgage based REIT's continue to get hit hard by the fear that low interest rates will cause their lucrative mortgages to be refinanced at a lower rate. A higher interest rate will lower their borrowing/loan ratio/leverage. The government may change reporting rules and this caused some confusion. Overall, my $7.40 entry offers decent upside and and a 12.0% dividend, with two more dividends scheduled for the balance of this year. (Sept and December). Between the two, I should get a good CAPS dividend reinstment price if the market doesn't sell off post dividend in expectations of a lower dividend moving forward.

The dividend looks stable for now. The REIT's can and do crash if the market crashes, but if the fears of government intervention wane or are catagorized farily then I don't see much downside for Dynex Capital. I don't expect much out of the markets the next year, although we may see varying degrees of relief/sucker rally's, so a strong Dividend payer should dividend reinvest for me nicely. A dividend payer rarely beats the S&P when it's on a tear, so doesn't always make a good caps play, but I'm comfortable with one that has a stable dividend and has show upside potential on the core equity share price. Dynex Capital has an "easy" 8-10% upside share price potential from here if things stabilize, could drop with the markets if things don't but should deliver about 6% in dividends between the Sept and Dec payouts before the dividend gets reassessed.

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REIT's come in several flavors, they could have rental property, industrial, commerical, residential, etc. There are several that operate around Mortgage Loans. While this is "what got the country in trouble" there is some opportunity here.

Adding Dynex Capital, Inc to my long term REIT Dividend plays. Several got hit hard in this last debt crisis correction. There are many that are Mortgage Investment Trusts that rely on the gap between low cost borrowing and mortgage rates and hope that a majority of the mortgages in their portfolio pay off. Currently many are backed by the governement, but this could change. In the meantime this 52 week low gives me 12%, (not guaranteed, but seems solid for now), and a low entry point. Exactly what you want for a dividend payer. All of these Mortgage REIT's have their pros and cons depending on leverage, backing, interest rates spread, US credit rating etc. Long term, I think they have a good chance of beating the S&P with dividend reinvestment. Beating the S&P in Q3-2009 - Q1 -2011 with a divend payer was not likely, but I think it can be over a year or two's time period.

See also JakilaTheHun's recent blog on DV and three other Mortgage REIT's.http://caps.fool.com/Blogs/four-mortgage-reits-with/622057

Banks, morgage companies, and financials in general will surely find the enviroment going forward challenging. The consumer is struggling, and all forms of credit are seeing rising loses. Thumbs down for this sector for the forseeable future. Additional capital will be required by regulators, and the appetite for risk has decreased dramatically over the last year. The FDIC is calling retired former employees back to deal with the potential collapse of 300 to 1000 banks in the coming year or two. In this decending cycle it will become more and more difficult to grow profits and expland while actual consolidation of the industry is taking place.

The credit crises and morgage meltdown in the U.S. isn't going anywhere this summer and is likely to only get worse. If Bear Sterns couldn't survive what hope is their for the rest of the financial sector. Yes, the financial sector seems to be jumping back and key reversals seem to be lifting bullish investors, but this ray of hope will end once investors understand how bad this looming recession is going to be. Even the hopeful and growing few in the financial sector are going to suffer from the troubles of the many.